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An iPhone can be an expensive investment, and given that its users generally carry their phones everywhere, damage from dropping, stepping on, running over and flushing iPhones are more common than warranty-related problems. And no warranty can protect you from theft. As a result many users have looked for third party insurance to try and protect themselves from loss.

Worth Avenue Group garnered a lot of attention at this year's MacWorld with their booth featuring a man methodically smashing iPhones with a hammer. According to Chris Holt at Macworld.com, they claim to cover the iPhone comprehensively, whether it has been dropped, stolen, or submerged in water or beer. According to their website, 80% of iPhone failures are due to an accident of some kind, and accidents are not covered by AppleCare. The annual premiums range from $55 US for an 8GB iPhone 3G or earlier to $79 for a top of the line 32GB 3GS. In addition to iPhones and other cell phones, Worth Avenue also covers laptops, cameras, game systems, and cell phones.

Square Trade also does extended warranties for iPhones and other products: they covered the MacBook I got off eBay. A SquareTrade offers an iPhone warranty to be purchased with your new iPhone, though it covers your iPhone for 2 years, as opposed to 1 year for AppleCare. The website shows annual premiums of $96 for an 8GB iPhone, $120 for a 16GB, and $144 for a 32GB. SquareTrade's warrranty does have a $50 deductible, though, unless the problem is covered by the Apple iPhone warranty (for things like a mechanical or electrical failure). SquareTrade, like Worth Avenue's insurance, says it also protects against drops, spills, and other accidents.however, says that the warranty "does not include loss, willful damage or damage occurring through gross misuse of the item. The damage must have occurred unintentionally while the item was being used as intended." That seems to exclude the I-hit-it-with-a-hammer claim. However, SquareTrade does say that if the iPhone battery life drops below 50% of the original, it's eligible for a replacement.

What's not clear is whether any insurer has coverage for iPhone envy. Carmi Korine, a director at Supercover Insurance in the UK, says that insurance claims for lost, stolen or damaged iPhones soar whenever Apple releases a new model. "While most customers take out insurance because they value their iPhone, we started to notice increases in claims as new and upgraded iPhones were launched - for short periods around new model or upgrade launches, claims for lost, stolen or damaged iPhones go through the roof," Korine says. The kinds of supposedly 'accidental' iPhone damage the insurance company had been called upon to cover included hammer marks, heel imprints, toilet bleach and "fire damage which the claimant found very difficult to explain."